The Federal Reserve still needs to push hard against threats to the U.S. economic recovery, and fiscal uncertainties in particular “loom very large right now,” an influential Fed policymaker said on Monday.
New York Fed President William Dudley defended the U.S. central bank’s shock decision last week not to trim its aggressive bond-buying, arguing in a speech that any changes to the quantitative easing program mush be based on the most recent measures of economic health.
A close ally of Fed Chairman Ben Bernanke, Dudley highlighted the drags from the sharp recent rise in longer-term interest rates, higher taxes and lower public spending adopted earlier this year, and questions over the U.S. debt limit and government funding as Congress meets this autumn.
Dudley also said the Fed could “wait a long time” to raise interest rates once the unemployment rate hits a 6.5 percent threshold.
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